By 2050, there will be 9.3 billion people on our planet. This growth will come almost exclusively from developing countries, making these regions the markets of the future. To sustain the population and its expanding need for food, crop production will also need to grow 50 percent by 2030.
Globally, more than 500 million smallholder farms (typically a farm that supports a single family through cash crop production) produce about 80 percent of the food consumed in Asia and sub-Saharan Africa. Most of the globe's production capacity for certain crops, like coffee and cocoa, is dominated by smallholders. In fact, 90 percent of world’s cocoa production comes from roughly 5.5 million smallholders.
In recent years, the ever-expanding and more complex global food supply chain has prompted greater interest in food safety and traceability. Organizations ranging from global, national and regional trade organizations, to processors, retailers and even consumers are increasingly concerned with how food production and quality control practices are tracked and documented.
While larger corporate farms have easy access to documentation tools, it’s more challenging for smallholders to be integrated into global value chains – a task that requires coordinated efforts among many stakeholders.
But some smallholders in Africa are leveraging a new software platform that allows them to easily manage the tracking of their own produce from farm to factory. With both mobile and desktop access to the cloud-based system, smallholders can stay on top of data from anywhere their smartphone, tablet or laptop has an internet connection.
The Rural Sourcing platform from SAP provides smallholder registration tools, pricing broadcasts, payments, SMS notifications, farmer buying/truck loading operations and transactional and geographical analytics. It consists of a smartphone application linked to a central database with a sophisticated analytical and geographical information system (GIS).
Rural Sourcing also provides access to valued information and services including sustainable export market data to help farmers achieve better prices and tailored agricultural extension services to help improve smallholder yield.
More than 15 pilot projects involving approximately 50,000 cashew, coffee, shea, rice, sesame and cocoa farmers across Africa and Latin America have been launched as part of a public-private partnership between SAP and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).
The platform is helping both farmer organizations and buyers run their businesses in a more structured, effective and efficient way by eliminating error-prone, time and effort-consuming paper-based administration. And, having a centralized location for accessing business support tools helps turn small family farmers into growing businesses.
With 60,000 members, the Uganda Coffee Farmers Alliance (UCFA) is testing Rural Sourcing with 24 of its Depot Committees across Uganda, where aggregated individual producers sell their crop as a group to improve trading and pricing.
After harvesting, coffee farmers deliver their beans to bulking stations, where they are registered and issued a bar-coded membership card. Using the Rural Sourcing smartphone app, their bags are recorded, and all subsequent transactions such as cash advances, bulking, hulling, selling to exporters and payments are captured digitally and synchronised with the central Rural Sourcing database (when mobile network coverage is available). The path of the beans and the money, is traced throughout the entire value chain.
“Until this, our entire administration had been based on paper and cash,” says Tony Mugoya, the UCFA’s managing director. “It was cumbersome, inefficient and vulnerable to fraud and corruption.” Now, payments can be made by mobile phone as well – using local mobile-money providers like Yo Uganda.
The entire trading chain has been digitized – from the individual smallholder members and their products via the intermediaries to the exporters. This detailed documentation of market information prevents arbitrary prices and handling fees, ensuring that the farmers get a fair price. Farmers gain direct access to export markets by improving their competitive position and bargaining power, and increasing margins. Similarly, exporters have a growing interest in tracing the origin of their beans and ensuring fair trade.
“It’s easy for us to analyze our members’ production and trends and write reports,” Mugoya said. Such reports, in turn, help the small farmers to negotiate microcredits. It also helps smallholders access loans. With transaction records for each individual farmer, African banks now have – for the first time – sufficient data to evaluate risk in order to provide loans for agricultural or household purposes.
About 15,000 UCFA coffee producers are registered on Rural Sourcing and already the members are seeing value. An evaluation of the first selling season indicates that the pricing achieved by the digitized UCFA farmers was approximately 15 percent higher than average.
This ability to compete and achieve better pricing based on volume sales and improved access to production data helps boost the local economy and improves the socio-economic situation for a vast number of under-serviced rural inhabitants in Uganda.